What Is Buy Now Pay Later?
Buy Now Pay Later is a payment method that is used by customers to purchase their daily use commodities on a credit basis without even using a credit card. This method is a type of loan whose repayment is done in installments after a certain period.
The reason for the popularity of this method is that it offers immediate access to finance product purchases without any delay. There are a variety of options available for loan repayment which are totally based on the total loan amount and the type of item purchased.
The most popular type of BNPL options includes Afterpay, Paypal, Klarna, Affirm, and Shopify.
How Does Buy Now Pay Later Work?
The process of BNPL works in these simple steps for both customers and retailers:
1. Customer Add the Items and Move to The Checkout Window
The BNPL process begins in a similar way as the other transactions are being performed. The customers get the option to complete the payment using BNPL which can be very quick and convenient.
2. Available BNPL Options Are Displayed by Retailers
When the customer is going to check out from the transaction, he/she will have the option to opt for the BNPL payment method just like other available credit/debit card methods.
3. Soft Credit Check Is Being Processed on The Customer
Once the customer chooses to opt for the BNPL method, the customer needs to fill up some of their personal details to provide authenticity to the BNPL money lender like name, address, contact number, etc.
After the customer is done with details, the BNPL lender runs a quick credit check on the customer’s information to get surety on the expected time and ability of loan repayment. Once the process is done, the vendor can easily move ahead in the process.
4. Owner/Vendor of BNPL Puts A Charge/Fee on The Retailer
A small percentage of the overall transaction is taken by the BNPL vendor which is directly paid to the retailer. The fee amount generally falls between 2%-8% which is deducted from the total sum of the transaction. The process is followed similarly as it used to be followed by credit card companies in previous times.
5. Balance Amount Is Being Paid Off by The Customers Over Time
Majorly, the BNPL process is interest-free for the customer in case they are able to repay the whole amount within 30 days. Or in case, if the customer takes much time to repay then, the BNPL vendor may share the lists of interest and different repayment plans.
It is very similar to the traditional credit card payment where the tenure of loan repayment decides the overall interest rate charged on the loan amount.
Explain the List of Reasons to Add BNPL (Buy Now Pay Later) On the E-Commerce Site
The BNPL process not only benefits the consumers but is very effective for e-commerce retailers as well. Let us see the impactful reasons why e-commerce sites should use Buy Now Pay Later:
1. Attracts A Huge Target Audience
The convenience of buying today and paying later is luring a huge audience base. Every other customer is opting for the buy now pay later method because of the no-interest features. After witnessing such excessive growth and demand for the buy now pay later method, retailers are opting to enhance their sales strategies.
Moreover, customers are also actively looking for stores that are offering them the option to use a super convenient mode of payment.
2. Builds A Strong Trust
No retailer like to offer a product trial service but by using a buy now pay later service, users can easily leverage the service. The ‘buy now pay later’ service does not bind the customer to buy the product, rather customers can try it and decide whether to buy it or not.
If the product fits their expectations then they can complete the purchase using the buy now pay later method or else they can return it without even thinking about the refund.
At the initial stage, the free return system may cost more but in the long run, it will help in building better customer relations and a sense of customer loyalty.
3. Decreases the Number of Cart Abandonment
The major reasons for the increase in cart abandonment are the poor payment options that frustrate the customers and force them to leave the items in the cart. However, adding a payment option of buy now pay later makes the checkout process simple and convenient. Using this method, customers do not have to indulge in the rush of adding card details. Just a simple option can fulfill the intention of the customer.
Other reasons to display how BNPL helps in less cart abandonment are customers need not to create an account to pay and do not have to share their card details with any untrusted site.
4. Ensures Customer Retention with Better Credit Solution
The BNPL method is good, especially for people who want to buy things on credit because there is no interest charged for the credit amount. This method allows customers to get relief from the budget constraint. Even if the customer is exhausted with the finances, the BNPL method allows them to make a quick purchase.
Moreover, the BNPL method is more suitable for customers because it is a better and safer form of getting credit. And thus, the customers get the freedom to become repeat customers by continuously using the BNPL method to complete the payment religiously.
5. Increases Overall Sales Margin
When the customer gets the freedom to make a purchase without paying immediately then they are more likely to repeat transactions which ultimately increases the sales margin of the retailers.
The BNPL makes the consumer confident about delayed payment and thus customers get the privilege to purchase even the high-priced product. So, now when a customer is going to purchase any product using BNPL, they need not to check their account balance, rather they can simply make the purchase.
Buy now pay later ensures that no customer is dropping any purchase because of the insufficient account balance at the moment rather they can split the total amount into small chunks and pay accordingly.
6. It is Highly Competitive
The market of “buy now pay later” is already high and giving unexpected results to all. Almost all organizations have successfully integrated BNPL into their checkout system. But if anybody has missed it then they are soon going to adopt this new trend.
Therefore, if you are planning to corner the market then you need to deliver services as per the customer expectations and fulfill the better market demands.
Top Reasons to Explain Why Buy Now Pay Later Is Suitable for Customers
The popularity of the buy now pays later method has skyrocketed in the market and therefore it is essential to educate the target audience about how the new trend can benefit customers.
- Customers can benefit from the increased level of affordability
- Customers can choose the repayment duration at their convenience
- Customers can get instant access to the credit amount opted to buy the product
- Customers can ensure a safe and secure process of transaction
- Customers will get access to pay no-cost EMI
- Customer will be able to follow the simple and transparent method of repayment
Buy now pay later is a thoughtful solution for both e-commerce retailers and customers. It allows customers the convenience of buying products for which they have to pay later. E-commerce retailers are excessively using the method because it engages a huge audience base by allowing them access to buy expensive or emergency products.
So, integrating the Buy now pay later system will definitely help in increasing the sales volume and fulfilling business targets to great extent.
Also, the business will provide you with an effective way to enhance and share the pain of the huge audience who usually struggles with a large purchase. However, before you land on the final decision, it is suggested that you must calculate the extra cost that will be incurred by your business in the near future.